ABA Survey: Banks Report CRE Lending Concentrations on the Rise

August 6, 2018

With the CRE lending market currently booming, banks are increasing their concentrations in this area — particularly in construction lending — according to findings from the 2018 Commercial Real Estate Lending Survey conducted by the American Bankers Association. Nearly one fourth (23 percent) of participants in this year’s survey reported having more than 100 percent of their total capital in construction concentrations, up slightly from a previous survey conducted in 2015. Meanwhile, 14 percent had over 300 percent in CRE concentration, also up from 2015. Sixty-four percent of banks had outstanding loans that were classified as high-volatility commercial real estate, up from 50 percent in 2015.

The most active lending classes were multifamily (which accounted for an average of 23 percent of banks’ CRE portfolios), followed by retail (18 percent) and office (17 percent). When asked to break down their portfolio by loan type, bankers reported that, on average, CRE non-owner occupied and owner-occupied loans made up 72 percent of their portfolios, consistent with the 2015 survey.

Lenders reported that competition from bank and nonbank lenders, as well as regulatory burden and requirements were the top challenges they faced. Seventy-nine percent of banks said they anticipate increasing their capital concentrations, with the majority citing “market conditions and/or demand” as the main driver for that increase. For more information, contact ABA’s Sharon Whitaker.